Snowballr · Cheat sheet
Mortgage decision cheat sheet
Affordability, refi, and the prepay-vs-invest math.
For: Home buyers and existing homeowners · Source: snowballr.io/cheat-sheets/mortgage-decision
28/36 affordability rule
- Housing ≤ 28% of gross monthly income (PITI = principal + interest + taxes + insurance)
- Total debt ≤ 36% of gross monthly income
- Conservative version: 25/33 if you have variable income or kids
Refinance break-even formula
Break-even months = closing costs ÷ monthly payment savings
If you plan to stay past break-even, refi makes sense. Add 6+ month buffer.
Refinance trigger thresholds
- Rate drop of 0.75–1.0% on current loan — usually worth it
- Rate drop of <0.5% — usually not worth closing costs
- Switching ARM → fixed when ARM reset incoming — often worth it
- Cash-out refi only if for major repair or to kill higher-rate debt
Prepay vs invest (general guide)
| Mortgage rate | Likely better choice |
|---|---|
| <3.5% | Invest the difference (huge spread) |
| 3.5–5% | Lean invest — but split is reasonable |
| 5–6.5% | Mostly a toss-up — depends on tax + risk preference |
| 6.5–8% | Lean prepay — guaranteed return beats risk premium |
| >8% | Prepay — no equity investment beats guaranteed 8%+ |
Decision rules
- 20% down avoids PMI (~0.5–1.5% of loan/yr). Worth waiting if close.
- 15-year vs 30-year: pick by your monthly comfort, not theoretical interest.
- Property tax + insurance escalate; budget the +25% over 5 years.
- HELOC is not an emergency fund — rates float and access can be revoked.